OCLR Tanks Optical; Needham Sorts Out Relative Risk

By Tiernan Ray

There’s trouble in fiber optics land today after optical component maker Oclaro (OCLR) late Friday warnedfiscal Q1 revenue for the September-ending three-month period would miss analysts’ estimates, thanks to “continued challenging market conditions in the segments of the optical communications space that Oclaro serves.”

Oclaro preliminarily projected $149 million in revenue for the quarter, below the company’s projection for $154 million, and below the Street consensus of $162 million. That the preliminary revenue includes amounts from Oclaro’s purchase of competitor Opnext, which closed in late July.

The company attributed the shortfall in part to “Slower than expected recovery of customer share of certain products to pre-flood levels, including certain data communications products,” and also to a slower ramp of new 40-gigabit and 100-gigabit optical links.

Needham & Co.’s component analyst Alex Henderson today tried to sort out who broadly the weakness might be spread amongst competitors. Reiterating a Hold rating on Oclaro shares, Henderson writes that it’s probably more particular to that company rather than general optical weakness: Oclaro’s weakness could imply weaker than expected conditions at Finisar and JDSU—We think it’s more an Oclaro problem and think Finisar will make its quarter. Fabrinet is likely within its guidance of flat to up 4% Q-Q despite providing services to these players.

He also likes equipment maker Ciena (CIEN) and test and measurement developer Emcore (EMKR) better, writing, “Coherent players such as Ciena and Emcore likely much more robust than rest of optical market and likely to perform better despite the weak commentary out of Oclaro.”

CIEN shares are down 19 cents, or 1.5%, at $12.85, while Emcore stock is off 3 cents, or 0.6%, at $5.44.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.